This is great–the right wing kooks are going to push for the sequester, senidng the economy into a recession. This will set up the dems to take gains in HOuse and Senate in 2014 and guarantee another dem in 2016. Thanks, right wingers……

usa8888

Obama would be a good addition to Mt Rushmoore. As the GOP fades into oblivion (with the legitimate rape GOP guys), the dems will strengthen….

usa8888

Mississippi has a lot of progressive democrasts, but unfortunately they are plagued by a plethora of backward thinking confederate loons….

usa8888

The right wing are helping the dems take back the House…Thank you!!!

Bobbyv

Let him finish his 2nd term before Mt. Rushmore

Doug Z

Keep spending

usa8888
Posted February 18, 2013 at 5:13 PM

This is great–the right wing kooks are going to push for the sequester, senidng the economy into a recession. This will set up the dems to take gains in HOuse and Senate in 2014 and guarantee another dem in 2016. Thanks, right wingers……

Officials at the US central bank fear it could create a public-relations nightmare after the Fed was lambasted for rescuing banks during the financial crisis. It is one factor prompting some inside the Fed to reconsider the eventual “exit strategy” from easy monetary policy.

In an interview with the Financial Times, James Bullard, president of the St Louis Fed, said: “If you think of the profitability of the biggest banks, if you’re going to talk about paying them something of the order of $50bn – well that’s more than the entire profits of the largest banks.”

Mr Bullard said that neither interest paid to banks nor possible losses on exit made any difference to the substance of monetary policy.

“I think it’s more just a question of the optics, and how you’re going to play the optics,” he added, referring to the perception of losses by the central bank. “And since it shouldn’t matter in a monetary policy sense you might as well play the optics in a better way than the one we’ve got planned.”

All banks hold reserves at the Fed. The central bank has boosted its balance sheet to more than $3tn as it buys assets to drive down long-term interest rates through its programme of quantitative easing.

It pays for the assets by creating bank reserves, which now amount to more than $1.6tn. The Fed could add another $1tn if it keeps buying assets for another year.

At the moment it only pays 0.25 per cent interest on those reserves. But according to its exit strategy, published in June 2011, the Fed plans to raise interest rates before it sells assets. Interest of 2 per cent on $2.5tn of reserves would run to $50bn a year.

That interest should not turn into profits for the banks. They will have to pass the revenues on by paying more interest to their depositors. But it could still add to a populist backlash in recent years against the Fed and the big banks.

One possible answer to the Fed’s larger balance sheet is to sell assets earlier in the exit process. Mr Bullard said that the Fed could consider creating accounting reserves now for any losses it expects in the future.

The Fed remits all of its earnings to the Treasury and has paid across $291bn in the last four years. But some of those gains will be reversed when it sells assets bought at today’s low interest rates at a time when rates are higher.

One banker argued that was the real danger. “It’s a little bit worrying for the politicians to get addicted to that level of income. The windfall profit has been a stunning number – that will go away over time.”

Bankers also noted that the exit strategy was uncertain and the Fed could increase interest rates on excess reserves more slowly than benchmark rates. They added that more reserves should be shifted out of the Fed and lent out as the economy improves.

Still, the eventual tightening could lead to substantial amounts being transferred to commercial banks from the Fed, given the amounts of cash they have parked there. Wells Fargo has $97.1bn sitting at the Fed, the largest amount of any bank, ahead of JPMorgan Chase at $88.6bn and Goldman Sachs at $58.7bn, according to an FT analysis of SNL data.

Foreign banks also have a striking amount of cash at the Fed, potentially aggravating the Fed’s PR problem. Analysts at Stone & McCarthy noted recently that there had been a steep increase in foreign banks placing reserves at the Fed and suggested that “US banks may have distaste for the opportunistic arbitrage”, between lower market rates and the interest on reserves, whereas overseas institutions “might not feel encumbered in the same fashion”.

Canada’s TD Bank, Germany’s Deutsche Bank and Switzerland’s UBS each have more than $12bn at the Fed.

Copyright The Financial Times Limited 2013. You may share using our article tools.
Please don’t cut articles from FT.com and redistribute by email or post to the web.

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Report poorhardworker | February 19 12:00am | Permalink
Good LORD!! These people in charge are idiots!! They think they are smarter than everyone else and the Laws of Economics/Accounting!! What pinheads they are for forgetting that the 45 Billion they are buying every month does not carry an interest charge that has been artificially manipulated to this low point (destroying the Saving Principle and decimating taxpayers retirement) will not have to be paid back at a realistic rate!! It is exactly what the democrats perpetrated on the country by changing the banking and lending laws that enticed people to buy more home/credit than they could afford because they NEVER looked to the consequences! What on Earth has happened to common sense??? You cannot spend more than you take in…and you all paid the price for “paying the minimum” as everything you bought cost you more than if you had waited until you could afford it!

Heed these words written over 2000 years ago:

“A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murderer is less to fear.”
? Marcus Tullius Cicero

The worst has yet to come…unfortunately. It will not be easy or pretty to dig ourselves out of the hole the wastrels in Washington have dug. Just think Greece….we are well on our way.

Doug Z

I am sorry for that big post.I did not mean all of it.

usa8888

Doug–if you had any economics education at all, you would know that we don’t have a spending problem. The stimulus was effective and you must spend to get out of a depression. But the right wing suffers from lack of education, and thus they talk about cutting spending in a recession–ABSURD. We beae NO relation to Greece. I suggest you go to college and learn something about economics.

Cathy

Jeff, lovely memory you have. Two days ago you couldn’t remember me counting what side left wing or right wing attacked more on this site. But today you call me the “name calling police.”
Does your memory only work when it’s to your advantage?

Doug Z

usa8888
Posted February 18, 2013 at 5:31 PM

Doug–if you had any economics education at all, you would know that we don’t have a spending problem.

You are right the Govs income now is down to President Eisenhower.

Did Obama do that? Why does he not fix the economy so the Gov will have income like Bush had.

Cathy

I find it funny that many of you liberals are so happy that Obama increased the CAFE for the autos and how Obama is making the world better today because of it.
First it isn’t going to change anything until 2016. Second, it shows you don’t understand the auto industry. The cars that are going to get the 42 MPG are the low cost compact cars that have an average life of eight years. Their size makes them no good for a car pool or a family car. They aren’t the cars that will be doing the highway driving. The mid-size and luxury cars that range 25 mpg are the cars that are well built and last 15 years.

With the average age of cars on the road being 10.8 years. The new CAFE will have very little impact on the environment.

We need to stop looking at laws for U.S. companies to save the environment. Russia, China, Japan and other countries are doing much more damage to the earth then the U.S. If you truly believe in global warming, we need to focus on bring every country up to the U.S. standards.

usa8888

The right wingers have NO plan to fix the economy. They only say we should cut spending drastically and this will somehow fix the economy—which is ABSURD, indicative of the their educational shortcomings. How could anyone with even a 6th grade education think this????

usa8888

Doug–The Bush economy had totally phoney income and growth–all based on real estate and bank fraud. Obama inherited Bush’s disaster and the right wing has been trying to meke things worse ever since.

usa8888

This just in: gun and ammo manufaturers are threatening to leave states which vote for Obama’s and the American people’s gun policies. Excellent!!! Let them move to the backward states in the South or plains states….Why can’t the right wingers just start their own country somewhere far, far away…like in central Africa????

Bobbyv

After 4+ It’s President Obama’s now, has to be. Lincoln had it much tougher and the buck stopped with him. That’s why his face is on a mountain.

Doug Z

usa

Heed these words written over 2000 years ago:

“A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murderer is less to fear.”
? Marcus Tullius Cicero

The worst has yet to come…unfortunately. It will not be easy or pretty to dig ourselves out of the hole the wastrels in Washington have dug. Just think Greece….we are well on our way

Doug Z

usa8888
Posted February 18, 2013 at 6:17 PM

Doug–The Bush economy had totally phoney income and growth–all based on real estate and bank fraud. Obama inherited Bush’s disaster and the right wing has been trying to meke things worse ever since.

You are right. No manufacturing or natural resouses. Obama, or a really great leader has to stop the buy of these products from others.

Obama is the same as Bush

Doug Z

usa

I do not like libs be that GOP or DNC. It is not the spending. It is nobody has the gust to bring back what we once had. It is manufacture your product

Doug Z

usa

It is over for Western type countries for they have been beat at producing product. When put that simple, producing product you know that is where the money is.Without it their will be no wealth for the peasants. No tax money for the Gov. no military to fight wars. We will just have to accept our new lives.